Over 320,000 borrowers have defaulted on student loans over the last year, including 15% of those who attended for-profit colleges:
The share of federal student loan defaults rose sharply last year, especially at for-profit colleges and universities, where 15 percent of borrowers defaulted in the first two years of repayment, up from 11.6 percent the previous year.
According to Department of Education data released Monday, 8.8 percent of borrowers over all defaulted in the fiscal year that ended last Sept. 30, the latest figures available, up from 7 percent the previous year.
At public institutions, the rate was 7.2 percent, up from 6 percent, and at not-for-profit private institutions, it was 4.6 percent, up from 4 percent.
“Borrowers are struggling in this economy,” said James Kvaal, deputy under secretary of education. “We see a strong relationship between student default rates and unemployment rates.”
As a rule of thumb, students are advised not to borrow a total amount for college which exceeds their starting salary after graduation. However, with the cost of 4-year private college educations reaching $200,000 and the median starting salary at $27,000, many graduates face a bleak financial outlook:
Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed. Even for college graduates — the people who were most protected from the slings and arrows of recession — the outlook is rather bleak.
Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work. What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all...
The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account.
Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted.
The student loan debt burden of Americans is set to top $1 trillion this year, surpassing what is owed on credit cards.
The biggest driver of the increase has been administrative costs, which are up 61%. This is double the rate of rise for instructional spending. Part of this is attributable to the fact that college endowments are now treated like hedge funds, with administrators playing the role of investment managers. Harvard's Larry Summers, for example, took advantage of the school's tax-sheltered $35 billion endowment by dumping much of it onto Wall Street (and losing nearly $2 billion).
Disgusted by the situation, some folks are bargain-hunting for better college deals overseas:
Let’s say you’re an Ivy League type. Why pay Harvard $52,000 per year when you can go to the University of Cambridge in England for around $19,000 per year? Cambridge is consistently rated as one of the top universities in the world: same quality education, a fraction of the price.
If that sounds like too much, consider a place like Hong Kong University. Tuition at Asia’s top school is around $15,000 per year, and there are plenty of scholarships and financial aid packages available. Not to mention you’d be networking with future movers and shakers in the region.
...Look at Erasmus University in the Netherlands, whose Rotterdam School of Management is one of the top business schools in Europe. Tuition in the all-English program is around $11,500 per year, 73% less than Notre Dame’s Mendoza School, and 26% less than Michigan’s Ross School of Business.
...Try Qatar University, where there are numerous English-language programs in disciplines such as business and engineering. Tuition for foreign undergraduates is just $4,000 annually, and you’d be spending formative years in one of the world’s most thriving, opportunity-rich economies.
Still too much? Try Albert Einstein’s Alma Mater, the Swiss Federal Institute of Technology (ETH) in Zurich. If you make the cut, ETH’s tuition fee is a whopping $750 per semester for both undergraduate and graduate programs, and the school is typically ranked among Europe’s top 5 universities.